The Biden-Harris Administration announced in August a Federal Student Debt Relief Plan for low- and middle-income families. It will provide up to $20,000 in debt relief to Federal Pell Grant recipients and up to $10,000 to non-Pell Grant recipients. Borrowers with loans held by the Education Department (ED) are eligible for this relief if their individual income is less than $125,000, or $250,000 for households. Alaska also has at least one specific student loan forgiveness program for this state only. Student loan debt relief will be one-time and not subject to federal income tax. State and local tax implications will vary.
Sana Efird, executive director of the Alaska Postsecondary Education Commission, which administers the Alaska State Student Loan Programs, answers questions for Sol de Medianoche.
Who can apply for student loan forgiveness? The Biden-Harris Administration recently announced a federal student loan cancellation plan. The initiative applies to borrowers with federally-held education loans – the same loans that are covered by the pandemic-related payment pause. Eligible loans must have been disbursed by June 30, 2022. This cancellation does not apply to private student loans.
Under the Biden-Harris plan, borrowers with annual income below $125,000 (individuals) and $250,000 (married couples/head of household) may have up to $10,000 of their federal student loans cancelled. If borrowers also received a Pell Grant when in school, then their loan forgiveness may be up to $20,000. If the borrower was enrolled as a dependent student in the 2021-22 school year, the parent(s) income will be used to determine the income threshold.
When will these loans be forgiven? Cancellation will be automatic if the Department of Education has the borrower’s income data for tax years 2020 or 2021. If the Department does not have the borrower’s income information, borrowers must submit a simple application. The Department will make the application available in early October. The Department of Education recommends that borrowers covered by the payment pause apply for the cancellation by November 15, 2022, to obtain the cancellation before the payment pause ends. However, the Department will continue to accept applications up to December 31, 2023.
Student loan forgiveness has received some criticisms, how do you respond to it and what benefits do you expect from this forgiveness? The Alaska Commission on Postsecondary Education supports financially responsible lending and borrowing practices.
What do you recommend to students so that they can benefit from loan forgiveness? Borrowers can view their loan balances and check their Pell Grant status by logging into their Federal Student Aid account online at www.studentaid.gov. We encourage borrowers to go directly to the Federal Student Aid website, www.studentaid.gov/debt-relief-announcement/, and FAQ page, https://studentaid.gov/debt-relief-announcement/one-time-cancellation, for the most up-to-date information or to contact their servicer. Be aware of misinformation and scammers. Be skeptical of information disseminated from sources other than the Department of Education and your servicer. Beware of scammers trying to take advantage of the Biden-Harris announcement. No legitimate company is going to charge you to help you apply for or receive the loan cancellation.
